42 comments:

Maybe he is correct to imply that Republicans and conservatives save and are interested in saving not only money but traditional American cultural as well. It's this savings that allows the next generation to liver better than ourselves.

In contrast, liberals just want to spend not only their own money, but everyone elses.

sloan said . . . It's this savings that allows the next generation to liver better than ourselves. In contrast, liberals just want to spend not only their own money, but everyone elses."

To me, this is an odd juxtaposition of sentences. The last six years has demonstrated two things. First, Republicans are just as willing to spend other people's money as libs/dems. Second, because they have decided to finance this spending with debt, it is clear that the "someone else" whose money they are spending is the next generation's.

To be fair, sloan said the next Generation will liver better. That means they are drinking more and therefore more dependent on their livers. Drinking to the memory of better times in the past. And to the continued paying of interest by many generations.

The thing that struck me about the description of Emo: He has silver hair!

Second, because they have decided to finance this spending with debt, it is clear that the "someone else" whose money they are spending is the next generation's.

If you have kids, there isn't really a difference between your money and the next generation's money -- your kids, after all, get whatever money you have left over. Assuming that the return on your savings is greater than the return on government debt (which is virtually certain), the "next generation" ends up with more money if they inherit both your share of government debt and the money you invested in lieu of paying more taxes.

The current interest rate of government debt is 5.375%; stock market returns average 7%. This means that a $1000 tax break paid for by government debt leaves the next generation, 30 years later, with $2800 *after* paying off the debt. Simply put, with interest rates this low it is stupid NOT to run a deficit. That's what the infamous quote "deficits don't matter" refers to.

People do similar things in their private lives all the time -- maintaining massive debt at low interest (a mortgage) while maintaining investments that yield higher rates of return (stocks and corporate bonds). They maintain that mortgage debt not because they themselves are stupid, but because selling off their investments to pay down that debt would be stupid -- they'd be losing money over the long term. You don't discard high-return investments to pay off low-interest debts.

One final bit of food for thought: advocates of progressive taxation (i.e., Democrats and many Republicans) believe that richer people, simply because they are richer and more able to pay, must shoulder a higher portion of the tax burden. Well, the next generation's going to be richer than this one, just as this one is richer than the one before it. So why not make them pay for our benefits? Poorer Americans make richer Americans pay for the former's government benefits every day.

It was so cold today (how cold was it?) that I saw a liberal with his hand in his OWN pocket.Emo? I thought he was dead.I like the story about the immigrant who registered Republican because he heard it was the party of the rich - that's where he wanted to be.And when some journalist told Charles Barkley that the the Republican party is for the rich, he replied, "I am rich, you asshole."

Theo, ole' Emo might not be doing an HBO comedy special right now, but he probably made 1500 to 2500 bucks for the weekend, plus lodging and airfare. Bigger Midwestern cities like Madison, Des Moines, the Quad Cities - all of those places pay pretty well in the winter, since the clubs are usually quite busy.

I used to do stand-up, and while the money's nothing like it was in the 1980s, a guy like Emo still has enough name recognition to pull down 4 figures a weekend in any club that books him.

Not too many jobs allow you to sleep in every day, work 7 hours a week and pay that kind of cash.

The last six years has demonstrated two things. First, Republicans are just as willing to spend other people's money as libs/dem

I agree with you on this. No matter who is in power, they seem to want to spend our money regardless. Perhaps then Emo was not talking about this. Maybe he was talking about the upper middle class - those making between $100k and $200k; i.e., the consumers of SUVs, 5000 sft homes, and family vacations. The dems seem to despise this group most of all.

The current interest rate of government debt is 5.375%; stock market returns average 7%. This means that a $1000 tax break paid for by government debt leaves the next generation, 30 years later, with $2800 *after* paying off the debt. Simply put, with interest rates this low it is stupid NOT to run a deficit.

Excellent point, Revenant. This is intriguing as it would seem to argue that our deficit isn't big enough which I don't think anyone would agree with. If I take my $1000 tax cut and invest it at 7% the above makes perfect sense. If I spend it on a big screen TV to watch the Super Bowl (actually, since the Patriots won't be in it, there's no need) it might not make sense. Does this say that a deficit caused by tax cuts is fundamentally different than a deficit caused by high spending?

Emo Phillips isn't funny. I was dragged into seeing one of his shows at the Comedy Club on State Street around this time last year and I don't know if I laughed more than once or twice during the entire show. Both warm-up comedians were better than he was.

Re: "No matter who is in power, they seem to want to spend our money regardless. "

As our founders discovered, even taxation with representation was not a guarantee against tyranny.

The only real answer comes when the power to tax is separated from the power to spend. Because our Congress can do both, it will always see the raising of taxes as good for us, no matter who's in charge.

One of the greatest power couples ever, reconquered a good part of the old Western Roman Empire, recodified the laws. Unless you are Belisarious what is not to love?

"More than Martin and Katharina Luther?"

What is so annoying about them? Katharina did a lot to domesticate Luther. When he nailed the thesis to the door, he was a skinny hard living pissed off Monk. After a few years of being married to Katharina he was a fat happy academic who loved to invite his students over to dinner.

"More than Wagner and Cosima von Bülow?"

I am not really sure about this one, but I doubt Emo and Judy are bright enough to know what Fascism means let alone inspire them, so maybe you have a point.

"More than MADONNA and SEAN PEN???"

Oh God yes. Not even close. If you knew who Emo and Judy were you wouldn't be asking that question.

This is intriguing as it would seem to argue that our deficit isn't big enough which I don't think anyone would agree with.

Well, not phrased that way, maybe. Few people would use the phrase "I don't owe nearly enough money on my house" either, but people nevertheless borrow against their home in order to make investments -- which demonstrates empirically that those people did, indeed, think they needed to have more debt.

I think we'd be better off running a bigger deficit and lowering taxes more, although I'm not sure when we'd pass the point of diminishing returns. There's a limited supply of money available for borrowing, and therefore a limit to how big the deficit can get. Deficits have the effect of pushing up interest rates (due to competition for lenders' dollars). At the moment interest rates are so low that it seems unlikely the deficit's having an effect.

Anyway, it isn't that deficits are good -- its that, if you're going to spend a metric assload of money on government spending, borrowing the money makes more economic sense, given current interest rates, than paying for them in tax revenues.

I don't disagree with your analysis for the most part but I would point out that it relies on (at least) three assumptions.

First, it assumes that a significant portion of current "savings" from deficit spending are saved and/or reinvested. Given the current savings rate for the U.S. I am not sure of this assumption.

Second, the benefits that you identify assume a relatively low interest rate environment. Further, low interest rates on the debt require that foreign entitiies (mainly China and Middle Eastern interests as I understand it) continue to be willing to buy our debt. What happens if it becomes politically, economically or socially advantageous for some of these lenders to force our borrowing costs to rise?

Third, it assumes that the deficit remains small relative to GDP. If they remain small relative to GDP "deficits don't matter". As they grow relative to GDP, they matter more. I am not opposed to all deficit spending. I can see running deficits at specific times but large structural deficits are (in my opinion) very bad. And while the current deficit does not alarm me, what is waiting for us in 2013/2014 does. That is why when Bush gives his SOTU speech you are going to hear about re-eliminating the deficit by 2012, I doubt you will hear a word about the deficit beyond that. (Unless he says something very plain like: "Unless we rein in entitlement spending, including Medicare Part D which I rammed through, we are in deep financial trouble.)

Both Tenuta and Phillips are acquired tastes. I never much cared for Phillips, but then he's from Milwaukee, so need I say more?

Tenuta has the distinction of going in a completely different direction from her contemporaries. While they were all going for the Ellen Degeneres/Paula Poundstone tie-wearing wry humor, she went back to the old-style vaudevillian brashness with her accordian and distinctly unfeminine style, all the while ironically insisting that she was a "goddess". She could be annoying, but at least she offered something different.

BTW, criticizing stand-up comics for having a liberal bent is kind of pointless. Liberalism is part of the sub-culture.

First, it assumes that a significant portion of current "savings" from deficit spending are saved and/or reinvested. Given the current savings rate for the U.S. I am not sure of this assumption.

If we had a flat tax that'd be a problem, but we have a progressive tax system that sticks the highest-income people -- i.e., those most likely to invest -- with the overwhelming majority of the tax bill.

Besides, all that is required is that the money eventually find its way to someone who invests it. It doesn't necessarily have to be the person who would have been taxed.

What happens if it becomes politically, economically or socially advantageous for some of these lenders to force our borrowing costs to rise?

If interest rates rose high enough and rates of return on investment didn't, borrowing would cease to be an attractive option and we'd have to raise taxes. The point remains that raising them *now*, when borrowing is cheap, would be dumb.

Third, it assumes that the deficit remains small relative to GDP. If they remain small relative to GDP "deficits don't matter".

I think the real problem is what percentage of GDP gets spent on wasteful government programs -- how they're paid for isn't really the issue.

I think that whenever you start complaining about deficit spending, you need to come clean as to whether you are suggesting cutting spending or increasing taxes. They are not equivalent, by an means, and those who are screaming the loudest about deficit spending also have records as big spenders and taxers.

As noted above, this wouldn't be as much a problem if we had a flat tax. We don't. We have a decently progressive system where most of the taxes are paid by a very small percentage of the population - who happen also to contribute the most to our economy. They are the most innovative, best educated, smartest, etc. And note that it isn't inherited wealth that pays the bulk of taxes, but earned income.

There are a lot of problems with increasing both spending and taxation, but one is that it transfers more and more of the wealth of this country from those who do the most to earn it to those who don't. Nearly half the population doesn't pay any income tax any more (though they continue to pay payroll taxes). Increasing spending and taxes mearly increases how much is transferred from those paying to those who don't.

So, if given the choice, I would prefer to fund any spending increases with debt instead of with tax increases. Of cocurse, I would also prefer cutting spending.

It is not really that deficits don't matter, but rather that taxes matter more. Taxes hurt the economy. Progressive taxation hurts the economy more. Wealth taxes provide a disincentive to invest, and income taxes provide a disincentive to work and invest. And, as importantly, the Keynsian multiplier is less than one - which means in part that government spending and "investing" is significantly less effective than private spending and investing.

I always find the logic in "I'm not a Republican, but I'm saving up to be one" to be laughable. The Democratic Party is run by the very rich, many of whom got their money through inheritance (or in Kerry's case, marriage). A couple of years ago, I saw a survey of the wealth in the Senate. The Democrats were ahead a bit on number of millionaires, and way ahead on total wealth.

So, it is always humorous when they try to pretend like they are champions of the lower classes. This was esp. humorous with the recent push to raise the minimum wage. Did Nancy Pelosi (or Ted Kennedy who has pushed this for decades) ever earned the minimum wage? Indeed, they most likely don't even pay it for their "help".

No, what they invariably do is push policies that hurt those not as rich as they, in order to pretend to help those even more disadvantaged. And these policies invariably hurt the real wealth creators in this country (as opposed to these wealth marriers and inheriters) the most (as well as the economy as a whole).

I think that whenever you start complaining about deficit spending, you need to come clean as to whether you are suggesting cutting spending or increasing taxes.

Fair question. My answer: Both.

Though I would say that many things we think of as "spending" are becoming more irrelevant. There will be a day in the not too distant future that you could eliminate spending from everything except entitlements and Defense and we will still have a significant deficit. By cramming through Medicare Part D, the Republicans made it worse and made it easier for Dems to call for universal health care.

I think implicit in Republican arguments for further deficit spending is the idea that when the system becomes so bloated and it is time to pay the piper, the American people will face reality and agree to cuts in services. That may be the case but I suspect that it is at least as likely that the American public would prefer to revert to pre-1986 or 1981 tax rates.

Sloanasaurus said... Maybe he is correct to imply that Republicans and conservatives save and are interested in saving not only money but traditional American cultural as well. It's this savings that allows the next generation to liver better than ourselves."

oh i love it when sloanasaurus intprets for us. well maybe he meant that the gop is a rich get richer off the backs of the working poor party....but the real question is what does he mean by "American culture"?